HSBC Malta said today it made a pre-tax profit of €52m in 2014, down by €38m, or 42%, compared to the previous year.
Cost efficiency ratio was 57%, against 50% in 2013.
Return on equity for the year was 7.7%, compared with 13.9% in 2013.
The advance to deposit liquidity ratio improved from 73% to 67%.
Gross new loans of €710m increased by €113m or 19% on 2013. Net loans and advances to customers were €3,273m and remained in line with 2013.
Customer deposits increased by 8% to €4,867m as at December 31, 2014.
Net operating profits before loan impairment provisions and excluding significant notable items (available-for-sale investment sales, ECB Comprehensive Assessment costs and lower insurance technical provision releases) were 12% down on the prior year.
The bank said key contributors to the decline in profitability were a €19m increase in loan impairment charges resulting principally from lower valuations on legacy commercial properties, a €14m decrease in income associated with the challenging operating environment and lower non-recurring revenue items, and a €5m rise in costs primarily due to regulatory fees and additional compliance investment.
All three main business lines, Retail Banking and Wealth Management, Commercial Banking and Global Banking and Markets, were profitable during the year under review.
Mark Watkinson, Director and Chief Executive Officer at HSBC Bank Malta said: “2014 was a year of material challenges on a number of fronts. Operating conditions and a changing regulatory environment have each had their own significant impact. Nevertheless the underlying performance of the key business lines has shown resilience and I am confident that the prudent approach that we have taken will serve us well. HSBC has an excellent franchise in Malta and the hard work and dedication of the bank’s team during the past year needs to be recognised. Despite the difficult operating conditions, we continue to invest in the bank and to build a long-term sustainable business that will serve the best interest of our customers, our staff, our shareholders and the community in which we work.”
HSBC Life Assurance (Malta) reported a profit before tax of €9m compared with €13m in 2013. While new insurance business was 10% higher than the prior year, the result in 2014 was negatively impacted by downward yield curve movements and lower technical reserve releases.
A net gain of €2m was reported as a result of a repositioning of the investment portfolio compared to €4m in 2013.
Operating expenses of €98m were €5m or 6% higher compared with the previous year.
The Board is recommending a final gross dividend of 2.6 cents per share (1.7 cents net of tax). This will be paid on April 24 to shareholders who are on the bank’s register of shareholders on March 23. The Board is also recommending a bonus issue of one share for every nine shares held by shareholders on the bank’s share register at the close of business on 29 April 2015 and shares will be available for trading on 30 April 2015. As a result of the bonus issue, reserves of €11m will be capitalised and share capital will increase from €97m to €108m.